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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Renewable energy supporters welcomed California Governor Jerry Brown's pledge to increase the state's renewable portfolio standard (RPS) to 50% by 2030, an aggressive increase from the current level of 33% by 2020. But utilities reacted more cautiously to the governor's vision, which was delivered January 5 as Democrat Brown began his fourth and final four-year term as California's governor.
The governor did not specify how he wanted the state to reach the higher RPS. In California, utilities get credit for utility-scale renewable generation, as well as distributed renewable resources like rooftop solar panels and community solar gardens.
Brown's goal of increasing the state's RPS to 50% by 2030 could re-energize utility-scale renewable power development in the Golden State. Utility-scale development of renewable energy resources sagged last year as utilities neared achievement of their 33% by 2020 RPS mandate. Last month, San Diego Gas & Electric (SDG&E) (San Diego, California) said it already exceeded its 30% by 2020 target. SDG&E is a subsidiary of Sempra Energy (NYSE:SRE) (San Diego).
Industrial Info is tracking 107 active utility-scale wind and solar projects under development in California. The total investment value (TIV) of these projects is $32.8 billion. The list includes six projects valued at $1 billion or more, and 15 valued at between $500 million and $1 billion. Industrial Info's subject-matter experts will discuss North American power trends, including renewables, at the upcoming 2015 Industrial Market Outlook in Houston, Texas, on January 29.
Brown has several ways to enact his plan: an executive order, a new law, or a rulemaking from the California Public Utilities Commission (CPUC) (San Francisco, California). A CPUC rulemaking would only apply to investor-owned utilities like Pacific Gas & Electric (San Francisco, California), a unit of PG&E Corporation (NYSE:PGC) (San Francisco, California); Southern California Edison (SCE) (Rosemead, California), a subsidiary of Edison International (NYSE:EIX) (Rosemead, California); and SDG&E. But the CPUC has no jurisdiction over the state's public power utilities like the Los Angeles Department of Water & Power (LADWP) (Los Angeles, California) and Sacramento Municipal Utility District (SMUD) (Sacramento, California). However, if the governor issued an executive order, or the state's Democrat-controlled Legislature passed a law, those public power utilities could be compelled to meet the new RPS.
Brown noted that California was a leader in renewable energy and energy efficiency, but he said more needed to be done to fight the rise of global climate change. If the U.S. and the world are to limit global temperature increases to 2 degrees Celsius by 2050, dramatic reductions of greenhouse gases are needed, he said, adding: "California, as it does in many areas, must show the way. We must demonstrate that reducing carbon is compatible with an abundant economy and human well-being. So far, we have been able to do that."
To limit the production of heat-trapping gases over the next 15 years, the California governor proposed three "ambitious" goals:
In outlining "a wide range of initiatives" to achieve his goal, Brown conspicuously omitted utility-scale renewables from an otherwise detailed list of options. He said he saw "more distributed power, expanded rooftop solar, micro-grids, an energy imbalance market, battery storage, the full integration of information technology and electrical distribution, and millions of electric and low-carbon vehicles. How we achieve these goals and at what pace will take great thought and imagination, mixed with pragmatic caution."
"California, since the beginning, has undertaken big tasks and entertained big ideas," Brown concluded. "Befitting a state of dreamers, builders and immigrants, we have not hesitated to attempt what our detractors have called impossible or foolish."
Some utilities and analysts have told Industrial Info that the days of large, utility-scale renewable projects are nearing an end. Those remotely located projects are extremely expensive and require extensive permitting and environmental reviews, as well as the need to build transmission projects to bring the energy from the generation sites to cities.
Jerry R. Bloom, a partner at Winston & Strawn (Los Angeles, California), told The Los Angeles Times: "There has been a dramatic slowdown (in utility-scale renewable projects). We're almost frozen out. There are no utility-scale contracts. There's no real market. The utilities' position is: 'We've reached the 33% and we're done'." He added, "A 50% by 2030 RPS would be "a game-changer."
The Obama administration is trying to streamline the permitting process for building renewable energy projects on public lands. The Times reported that the president has set aside 22 million acres of public land in California to support renewable energy. Obama wants to site 20,000 megawatts of renewable power on federal land by 2020.
Data from the U.S. Bureau of Land Management (BLM) (Washington, D.C.), a branch of the U.S. Department of the Interior (DOI) (Washington, D.C.), hints at the problem. According to The Los Angeles Times, the BLM has received 375 applications for renewable energy-related projects in California since 2007, but only 18 have been approved. The information came from the BLM State Director Jim Kenna.
Martín Múgica, president and chief executive at Iberdrola Renewables LLC (Portland, Oregon), the U.S. unit of Iberdrola S.A. (MCE:IBE) (Bilbao, Spain), praised Brown's new RPS goal: "Many thought the initial 33% goal was too challenging, yet California will readily surpass that number. The governor's plan will spark innovation across the electricity sector and clearly encourage large-scale renewable energy development."
Rhone Resch, president and chief executive of the Solar Energy Industries Association (SEIA) (Washington, D.C.), added: "California's 'lead-by-example' green initiatives are being copied in state after state, and have helped to fuel the tremendous growth of solar nationwide."
The views of utilities were more cautious, nuanced and circumspect. In a statement, SCE said: "We look forward to working with the administration to develop and implement this group of measures to achieve a lower-carbon future. Southern California Edison supports flexible plans to reduce carbon emissions, and we agree that combinations of increased renewable energy resources, energy efficiency, expansion of the use of electric vehicles, energy storage and other technologies and strategies will be needed to make the desired level of carbon reductions. Higher-than-present levels of renewable energy will likely be part of any overall carbon reduction program."
The Los Angeles Department of Water & Power raised a concern about a 50% RPS by 2030. In a statement, Randy Howard, LADWP senior assistant general manager for the power system, said the utility incorporated a 50% RPS into its integrated resource plan and determined "the concerns related to power reliability and higher rate impacts significantly outweigh the reduction in greenhouse gas emissions. LADWP anticipates significant amounts of over-generation (an event in which electricity generation exceeds load demand) in a 50% RPS scenario, which not only impacts reliability, but also drives electricity rates upwards."
"Over-generation grows exponentially beyond 33% RPS, which not only causes negative pricing and requires costly energy storage systems, but also impacts reliability," Howard continued. "In addition, a 50% RPS entails a portfolio that mainly relies on intermittent resources such as wind and solar, requiring more frequent use of less-efficient, quick-starting natural gas-fired generation to firm renewables, thereby reducing the potential emissions benefits from renewables."
After considering these reliability and rate impact issues, LADWP said its integrated resource plan adopted a recommendation of 40% RPS, along with higher adoption of energy efficiency and electrification of the transportation sector as cost-effective and reliable solutions that are equivalent to the GHG reductions that would result from a 50% RPS.
"Given Governor Brown's liberal political proclivities, I'm almost tempted to say his plan is another example of California Dreamin', as the old Mamas & the Papas song used to say," said Brock Ramey, Industrial Info's North American power specialist. "But that was the prevailing wisdom back in 2002, when California enacted its first RPS. The scientists, developers, equipment manufacturers and utilities in that state have consistently found a way to achieve renewable energy ambitious goals. So I wouldn't put anything out of reach--particularly if the federal government reinstates a Production Tax Credit (PTC) for wind power, or the state provides meaningful financial incentives or penalties for not meeting the 50% by 2030 goal."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
The governor did not specify how he wanted the state to reach the higher RPS. In California, utilities get credit for utility-scale renewable generation, as well as distributed renewable resources like rooftop solar panels and community solar gardens.
Brown's goal of increasing the state's RPS to 50% by 2030 could re-energize utility-scale renewable power development in the Golden State. Utility-scale development of renewable energy resources sagged last year as utilities neared achievement of their 33% by 2020 RPS mandate. Last month, San Diego Gas & Electric (SDG&E) (San Diego, California) said it already exceeded its 30% by 2020 target. SDG&E is a subsidiary of Sempra Energy (NYSE:SRE) (San Diego).
Industrial Info is tracking 107 active utility-scale wind and solar projects under development in California. The total investment value (TIV) of these projects is $32.8 billion. The list includes six projects valued at $1 billion or more, and 15 valued at between $500 million and $1 billion. Industrial Info's subject-matter experts will discuss North American power trends, including renewables, at the upcoming 2015 Industrial Market Outlook in Houston, Texas, on January 29.
Brown has several ways to enact his plan: an executive order, a new law, or a rulemaking from the California Public Utilities Commission (CPUC) (San Francisco, California). A CPUC rulemaking would only apply to investor-owned utilities like Pacific Gas & Electric (San Francisco, California), a unit of PG&E Corporation (NYSE:PGC) (San Francisco, California); Southern California Edison (SCE) (Rosemead, California), a subsidiary of Edison International (NYSE:EIX) (Rosemead, California); and SDG&E. But the CPUC has no jurisdiction over the state's public power utilities like the Los Angeles Department of Water & Power (LADWP) (Los Angeles, California) and Sacramento Municipal Utility District (SMUD) (Sacramento, California). However, if the governor issued an executive order, or the state's Democrat-controlled Legislature passed a law, those public power utilities could be compelled to meet the new RPS.
Brown noted that California was a leader in renewable energy and energy efficiency, but he said more needed to be done to fight the rise of global climate change. If the U.S. and the world are to limit global temperature increases to 2 degrees Celsius by 2050, dramatic reductions of greenhouse gases are needed, he said, adding: "California, as it does in many areas, must show the way. We must demonstrate that reducing carbon is compatible with an abundant economy and human well-being. So far, we have been able to do that."
To limit the production of heat-trapping gases over the next 15 years, the California governor proposed three "ambitious" goals:
- Increase from 33% to 50% the portion of the state's electricity from renewable sources
- Reduce today's petroleum use in cars and trucks by up to 50%
- Double the efficiency of existing buildings and make heating fuels cleaner
In outlining "a wide range of initiatives" to achieve his goal, Brown conspicuously omitted utility-scale renewables from an otherwise detailed list of options. He said he saw "more distributed power, expanded rooftop solar, micro-grids, an energy imbalance market, battery storage, the full integration of information technology and electrical distribution, and millions of electric and low-carbon vehicles. How we achieve these goals and at what pace will take great thought and imagination, mixed with pragmatic caution."
"California, since the beginning, has undertaken big tasks and entertained big ideas," Brown concluded. "Befitting a state of dreamers, builders and immigrants, we have not hesitated to attempt what our detractors have called impossible or foolish."
Some utilities and analysts have told Industrial Info that the days of large, utility-scale renewable projects are nearing an end. Those remotely located projects are extremely expensive and require extensive permitting and environmental reviews, as well as the need to build transmission projects to bring the energy from the generation sites to cities.
Jerry R. Bloom, a partner at Winston & Strawn (Los Angeles, California), told The Los Angeles Times: "There has been a dramatic slowdown (in utility-scale renewable projects). We're almost frozen out. There are no utility-scale contracts. There's no real market. The utilities' position is: 'We've reached the 33% and we're done'." He added, "A 50% by 2030 RPS would be "a game-changer."
The Obama administration is trying to streamline the permitting process for building renewable energy projects on public lands. The Times reported that the president has set aside 22 million acres of public land in California to support renewable energy. Obama wants to site 20,000 megawatts of renewable power on federal land by 2020.
Data from the U.S. Bureau of Land Management (BLM) (Washington, D.C.), a branch of the U.S. Department of the Interior (DOI) (Washington, D.C.), hints at the problem. According to The Los Angeles Times, the BLM has received 375 applications for renewable energy-related projects in California since 2007, but only 18 have been approved. The information came from the BLM State Director Jim Kenna.
Martín Múgica, president and chief executive at Iberdrola Renewables LLC (Portland, Oregon), the U.S. unit of Iberdrola S.A. (MCE:IBE) (Bilbao, Spain), praised Brown's new RPS goal: "Many thought the initial 33% goal was too challenging, yet California will readily surpass that number. The governor's plan will spark innovation across the electricity sector and clearly encourage large-scale renewable energy development."
Rhone Resch, president and chief executive of the Solar Energy Industries Association (SEIA) (Washington, D.C.), added: "California's 'lead-by-example' green initiatives are being copied in state after state, and have helped to fuel the tremendous growth of solar nationwide."
The views of utilities were more cautious, nuanced and circumspect. In a statement, SCE said: "We look forward to working with the administration to develop and implement this group of measures to achieve a lower-carbon future. Southern California Edison supports flexible plans to reduce carbon emissions, and we agree that combinations of increased renewable energy resources, energy efficiency, expansion of the use of electric vehicles, energy storage and other technologies and strategies will be needed to make the desired level of carbon reductions. Higher-than-present levels of renewable energy will likely be part of any overall carbon reduction program."
The Los Angeles Department of Water & Power raised a concern about a 50% RPS by 2030. In a statement, Randy Howard, LADWP senior assistant general manager for the power system, said the utility incorporated a 50% RPS into its integrated resource plan and determined "the concerns related to power reliability and higher rate impacts significantly outweigh the reduction in greenhouse gas emissions. LADWP anticipates significant amounts of over-generation (an event in which electricity generation exceeds load demand) in a 50% RPS scenario, which not only impacts reliability, but also drives electricity rates upwards."
"Over-generation grows exponentially beyond 33% RPS, which not only causes negative pricing and requires costly energy storage systems, but also impacts reliability," Howard continued. "In addition, a 50% RPS entails a portfolio that mainly relies on intermittent resources such as wind and solar, requiring more frequent use of less-efficient, quick-starting natural gas-fired generation to firm renewables, thereby reducing the potential emissions benefits from renewables."
After considering these reliability and rate impact issues, LADWP said its integrated resource plan adopted a recommendation of 40% RPS, along with higher adoption of energy efficiency and electrification of the transportation sector as cost-effective and reliable solutions that are equivalent to the GHG reductions that would result from a 50% RPS.
"Given Governor Brown's liberal political proclivities, I'm almost tempted to say his plan is another example of California Dreamin', as the old Mamas & the Papas song used to say," said Brock Ramey, Industrial Info's North American power specialist. "But that was the prevailing wisdom back in 2002, when California enacted its first RPS. The scientists, developers, equipment manufacturers and utilities in that state have consistently found a way to achieve renewable energy ambitious goals. So I wouldn't put anything out of reach--particularly if the federal government reinstates a Production Tax Credit (PTC) for wind power, or the state provides meaningful financial incentives or penalties for not meeting the 50% by 2030 goal."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
